EX-10.7









Exhibit 10.7




BETWEEN




YE JIAN HUA




ZHOU JIAN BIN




ZHEJIANG DAHUA CONSTRUCTION GROUP CO., LTD




AND




CHINA HYDROELECTRIC CORPORATION




SHARE TRANSFER AND CAPITAL INCREASE CONTRACT




For




YUNNAN HUABANG ELECTRIC POWER DEVELOPMENT



 CO., LTD




 









 





CONTENTS




	 	 	 	 	 
	Chapter I Definitions
	 	 	5	 
	Chapter II Transfer of Equity Stake
	 	 	7	 
	Chapter III Capital Increase
	 	 	11	 
	Chapter IV Representations and Warranties by All Parties
	 	 	12	 
	Chapter V Disclosures, Representations and Warranties by Transferors
	 	 	13	 
	Chapter VI Disclosures, Representations and Warranties by Transferee
	 	 	18	 
	Chapter VII Employees
	 	 	19	 
	Chapter VIII Confidentiality
	 	 	19	 
	Chapter IX Breach of Contract
	 	 	21	 
	Chapter X Force Majeure
	 	 	22	 
	Chapter XI Resolution of Disputes
	 	 	23	 
	Chapter XII Applicable Law
	 	 	24	 
	Chapter XIII  Miscellaneous
	 	 	25	 
	Appendix I Form of Power of Attorney
	 	 	30	 
	Appendix II Existing Debts and Borrowings of the Company
	 	 	31	 






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SHARE TRANSFER AND CAPITAL INCREASE CONTRACT



This Share Transfer and Capital Increase Contract (hereinafter referred to as “this Contract”) is
executed by the following Parties in Mang City, Dehong Prefecture, Yunnan Province, the People’s
Republic of China, on March 15, 2007.





	(1)	 	Party A: China Hydroelectric Corporation (hereinafter referred to as “Transferee”), a company
registered and established in accordance with the laws of Cayman Islands, with its registered
address at 558 Lime Rock Road, Lime Rock, Connecticut 06039, the authorized representative of which
is John D. Kuhns, whose position is Chairman and the nationality is United States of America;
	 
	(2)	 	Party B: Ye Jian Hua, a PRC citizen with the PRC ID card number 332521195810064429, and
domicile at No. 20, Yuxi Yunwukeng Village, Dagangtou Town, Liandu District, Lishui City, Zhejiang
Province;
	 
	(3)	 	Party C: Zhou Jian Bin, a PRC citizen with the PRC ID card number 332524196905200036, and
domicile at No. 9, Fengxiangnong, Longyuan Town, Longquan City, Zhejiang Province;
	 
	(4)	 	Party D: Zhejiang Dahua Construction Group Co., Ltd, a limited liability company registered and
established in accordance with the laws of China, with its registered address at No. 751, Qianwang
Street, Jincheng Road, Lin’an City, the legal representative of which is Chen Xiao Hua, whose
position is President.




Party B, Party C and Party D are hereinafter collectively referred to as the “Transferors”. The
Transferors and Transferee are hereinafter collectively referred to as “All Parties” as well as
each of the Transferors and Transferee is hereinafter referred to as “Party”.




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WHEREAS:





	(1)	 	Party B owns thirty percent (30%) of the equity stake of Yunnan Huabang Electric Power
Development Co., Ltd., and can exercise all of its full rights as a shareholder;
	 
	(2)	 	Party C owns twenty-one percent (21%) of the equity stake of Yunnan Huabang Electric Power
Development Co., Ltd., and can exercise all of its full rights as a shareholder;
	 
	(3)	 	Party D owns forty-nine percent (49%) of the equity stake of Yunnan Huabang Electric Power
Development Co., Ltd., and can exercise all of its full rights as a shareholder;
	 
	(4)	 	Yunnan Huabang Electric Power Development Co., Ltd., as the owner, is legally operating
Binlangjiang Hydroelectric Power Station Project;
	 
	(5)	 	The Transferors are willing to transfer all equity stake of Yunnan Huabang Electric Power
Development Co., Ltd. respectively held by all of them to the Transferee, which represents one
hundred percent (100%) of the equity stake of Yunnan Huabang Electric Power Development Co., Ltd.
held by the Transferors (hereinafter referred to as “Equity Stake”);
	 
	(6)	 	The Transferee is willing to acquire one hundred percent (100%) of the equity stake of Yunnan
Huabang Electric Power Development Co., Ltd from the Transferors, subject to the terms and
conditions set out in this Contract;
	 
	(7)	 	Upon the acquisition of the Equity Stake, the Transferee is willing to increase the registered
capital of Yunnan Huabang Electric Power Development Co., Ltd. in cash so as to increase the
registered capital of




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	 	 	Yunnan Huabang Electric Power Development Co., Ltd. to RMB 175,000,000;






	(8)	 	Based on the above, the Transferee shall made a total investment in the amount of RMB
175,000,000, among which RMB50,000,000 shall be paid as the transfer price and the other
RMB125,000,000 shall be paid as the Capital Increase.




Therefore, after friendly consultations, on the principles of equality and mutual benefit, all
Parties to this Contract have reached the following agreements in accordance with the provisions of
the “Company Law of the People’s Republic of China” and other relevant laws and regulations of
China.




Chapter I Definitions




Article 1 Definitions 



Unless otherwise prescribed and stipulated, the following terms used in this Contract shall have
the meanings set forth as follows:



“New Articles of Association” means the new Articles of Association of Yunnan Huabang Electric
Power Development Co., Ltd. upon completion of the share transfer and capital increase stipulated
herein, which has been approved by the Examination and Approval Authority.



“PRC” or “China” refers to the People’s Republic of China, and insofar as this Contract is
concerned, shall exclude Hong Kong, Taiwan and Macao.




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“Capital Increase” means, upon the acquisition of the Equity Stake, the Transferee contributes new
capital (in the amount of RMB125,000,000) into the registered capital of Yunnan Huabang Electric
Power Development Co., Ltd.



“Claims” means claims, actions, demands, proceedings judgments liabilities, damages amounts, costs
and expenses (including legal costs and disbursements) whatsoever and howsoever arising.



“Signing Date” means the date on which this Contract is signed.



“Encumbrance” means any mortgage, assignment, lien, charge, pledge, title retention, right to
acquire, security interest, option, pre-emptive right, and any other restriction or conditions
whatsoever including:





	 	(i)	 	any interest or right granted or reserved in or over or affecting the Equity Stake for
Transfer; or
	 
	 	(ii)	 	the interest or right created or otherwise arising in or over the Equity Stake for Transfer
under a fiduciary transfer, charge, lien, pledge, power of attorney or other form of encumbrance;
or
	 
	 	(iii)	 	any security over the Equity Stake for Transfer for the payment of a debt or any other
monetary obligation or the performance of any other obligation.




“Examination and Approval Authority” pursuant to the provisions for the examination and approval of
projects which have investments by foreign investors in the PRC, refers to the relevant Chinese
government department having authority to examine and approve this Contract and the New Articles of
Association of Yunnan Huabang Electric Power Development Co., Ltd, and to grant approval for the
transfer of Equity Stake and Capital Increase contemplated in this Contract.




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“Company” refers to Yunnan Huabang Electric Power Development Co., Ltd., a limited liability
company registered and established in accordance with the laws of China, with its registered
address at Xingba, Xincheng Township, Yingjiang County, Yunnan Province, PRC, the legal
representative of which is Zhou Jian Bin, whose position is Chairman of the Board of Directors.



“Project” means Binlangjiang Hydroelectric Power Station Project, which is legally and validly
owned and operated by the Company.



“RMB” or “Renminbi” refers to the legal currency of the PRC.



“Third Party” refers to any natural person, legal entity, or other organization or entity, other
than the parties to this Contract.



“US Dollar” or “US$” means the legal currency of the United States of America.



“Working Day” refers to the days on which the banks in both Beijing and New York are open for
business.




Chapter II Transfer of Equity Stake




Article 2 Transfer of Equity Stake 



Pursuant to the terms stipulated in this Contract, the Transferors agree to transfer to the
Transferee and the Transferee agrees to accept from the Transferors the Equity Stake being one
hundred percent (100%) of the equity stake in the Company with all the rights and obligations of
and attaching to the Equity Stake for transfer including, without limiting the generality thereof,
all the rights to




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receive dividends and to receive or subscribe for shares (if any) declared, paid or issued by the
Company and free from any Claims or Encumbrances.




Article 3 Share Transfer Price 





	 	3.1	 	The Transferors and Transferee agree that the Transfer Price for the transfer of the Equity
Stake shall refer to the appraisal value of the Equity Stake given in the Valuation Report prepared
by Beijing Jing Du Asset Appraisal Co., Ltd. (a qualified valuation agency). The Transferors and
Transferee after consultations have finally determined that the price for the Equity Stake shall be
agreed at RMB50,000,000 (hereinafter referred to as the “Transfer Price”). Specifically, the amount
respectively payable to the Transferors shall be as the follows:




Party B: RMB15,000,000;

Party C: RMB10,500,000;

Party D: RMB24,500,000.





	 	3.2	 	The Transferee shall pay the aforesaid Transfer Price in equivalent US Dollar to the
Transferors. The Transferors and Transferee have agreed that the foreign exchange rate used to
determine the Transfer Price in US Dollars shall be the middle rate of Renminbi with US Dollar
announced by the People’s Bank of China on the previous date of Settlement Date (as defined in
Article 5.1).
	 
	 	3.3	 	Upon the completion of the Equity Transfer stipulated in this Contract and the Capital Increase
stipulated in Chapter III, the registered capital of the Company shall be in the amount of
RMB175,000,000, which is composed by the original registered capital of the Company in the amount
of RMB50,000,000 plus the increased capital in the amount of RMB125,000,000 stipulated in Chapter
III. Upon the completion of




8









 






	 	 	 	the Equity Transfer and Capital Increase stipulated in Chapter III hereof, the total investment of
the Company shall be in the amount of RMB500,000,000.






			
	Article 4	 	Conditions Precedent for the Payment of the Transfer Price and Capital Increase 






	 	4.1	 	Under this Contract, the conditions precedent for the payment of the Transfer Price and Capital
Increase by the Transferee shall be: (1) this Contract, the New Articles of Association, the
transfer of the Equity Stake and Capital Increase stipulated in this Contract shall have been
approved in writing by the Examination and Approval Authority; and (2) after the signing of this
Contract, there has been no material adverse change on the Company and/or the Project.
	 
	 	4.2	 	In the event that any of the conditions set out in Article 4.1 have not been satisfied or
implemented, and the Transferee has not indicated its waiver of the said conditions or any of them
in writing, the Transferee shall not assume any obligations to pay the Transfer Price to the
Transferors.
	 
	 	4.3	 	The Transferors and Transferee agree that they shall use their best efforts to procure the
approval of this Contract and the New Articles of Association from the Examination and Approval
Authority in a timely fashion.
	 
	 	4.4	 	This Contract shall lapse automatically and have no binding effect on either the Transferors or
the
Transferee if the conditions set out in Article
4.1 have not been satisfied within two (2) months commencing from the Signing Date or other longer
period as determined by the Transferee at




9









 








	 	 	 	its sole discretion (such extension shall be confirmed by the Transferee in writing).





Article 5 Settlement 





	 	5.1	 	The Settlement Date shall be the 25th date in the month in which the Transferee has received
all the requisite approval documents issued by the Examination and Approval Authority as stipulated
in Article 4 (hereinafter referred to as the “Settlement Date”). The Transferee shall, on or before
the Settlement Date, make the full payment of the Transfer Price and the Capital Increase in a lump
by remitting the aforesaid amount into the bank accounts designated by the Transferors and the
Company respectively. The obligation of Transferee shall be deemed as having been fully
accomplished after the Transfer Price and Capital Increase have been fully remitted into the bank
accounts designated by the Transferors and the Transferee shall not assume any responsibilities or
obligations thereafter.
	 
	 	5.2	 	Within five (5) days after the Transfer Price arriving at the bank accounts designated by the
Transferors, the Transferors shall take the responsibility, under the authorization of the
Transferee, to complete the registrations of receiving foreign exchange for share transfer
 with local governmental authority in charge of the administration of
foreign exchange. Upon the completion of such registrations, the Transferors shall immediately
provide the Transferee with the originals of Registration Form of Receiving Foreign Exchange for
Share Transfer .
	 
	 	5.3	 	The Transferors shall issue the receipts to the Transferee within five (5) Working Days after
having received the Transfer Price from the Transferee.




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	 	5.4	 	The Transferors and Transferee shall forthwith take all necessary steps to complete the
procedures for the settlement of the transfer of Equity Stake within thirty (30) Working Days
after the Settlement Date so as to make the Equity Stake registered under the name of the
Transferee.





Article 6 Taxes Payable under the Transfer of Equity Stake 



Any taxes or fees arising out of and payable pursuant to the fulfilment of the terms of this
Contract by each of Transferors and Transferee shall be payable by the respective Party liable for
the taxes or fees under the provisions of relevant laws and regulations of China.




Chapter III Capital Increase




Article 7 Capital Increase 



Upon the acquisition of the Equity Stake, the Transferee will contribute RMB125,000,000 to the
registered capital of the Company as the increased capital so as to increase the registered capital
of the Company to RMB175,000,000.




Article 8 Term and Form of Capital Increase 



The amount of the Capital Increase shall be remitted to the Company’s account by the Transferee
within five (5) Working Days after the Transferee has received all the requisite approval documents
issued by the Examination and Approval Authority as stipulated in Article 4, the Company has
obtained the Foreign




11









 







Exchange Registration Certificate and the foreign exchange account of the Company has been opened
(provided not conflicting with the above Article 5.1).



The Transferee shall pay the aforesaid Capital Increase in equivalent US Dollars and the foreign
exchange rate shall be the middle rate of Renminbi with US Dollar announced by the People’s Bank of
China on the previous date before the actual payment date of the Capital Increase.




Chapter IV Representations and Warranties by All Parties




Article 9 Representations and Warranties by All Parties 





	 	9.1	 	Prior to the signing of this Contract, each Party shall provide the other Party with a power of
attorney (in the form as shown on Appendix I to this Contract) to authorize the personnel to sign
this Contract on its behalf. If the signing party is an individual, such individual shall provide a
copy of his/her identification card together with the original of the identification card being
shown.
	 
	 	9.2	 	The Transferors and Transferee confirm that from the Signing Date this Contract shall be
legally binding on all Parties.
	 
	 	9.3	 	Upon the signing of this Contract, the Transferors and Transferee hereby state that the
documents and information provided to each other or its/or their agencies (including, without
limitation, the lawyers, valuer, financial consultants, etc.) prior to the Signing Date are still
valid, and in case of any discrepancies therein with the terms of this Contract, this Contract
shall prevail.




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	 	9.4	 	The Transferors and Transferee hereby agree that upon this Contract coming into effectiveness,
the executed contracts or documents pertaining to the transfer of the Equity Stake prior to this
Contract shall lapse automatically.
	 
	 	9.5	 	After the Settlement Date, except for the delayed collection of the income of the electricity
generation of the last month, all rights and obligations enjoyed and undertaken by the Transferors
over the Equity Stake shall be entirely transferred to the Transferee.
	 
	 	9.6	 	All Parties to this Contract agree to strive jointly in coordinating the work for the
completion of all the procedures for the transfer of the Equity Stake, including but not limited to
the registration, filing of record, and etc., and the expenses arising therefrom shall be borne by
all Parties hereto together.





Chapter V Disclosures, Representations and Warranties by The Transferors




Article 10 Disclosures, Representations and Warranties by the Transferors 



The Transferors hereby jointly represent and warrant to the Transferee that:





	 	10.1	 	All information and facts relating to the Company that is in the possession of the Transferors
or is known to any of Transferors which will have a substantive and adverse effect on the
Transferors’ ability to fulfil any of its obligations in this Contract or when disclosed to the
Transferee shall have a substantive effect on the willingness of the Transferee to sign and fulfil
its obligations under this Contract, have been disclosed to the Transferee and the information
provided by the




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	 	 	 	Transferors to the Transferee does not contain any representation that is untrue or misleading.






	 	10.2	 	No lawsuits, arbitrations, or other legal or administrative proceedings or governmental
investigations are on-going against the Transferors that will materially affect their ability to
sign this Contract or fulfil their obligations under this Contract.
	 
	 	10.3	 	Transferors hereby jointly undertake that none of them will take any action after the
Settlement Date that will cause any adverse impact on the Company or the Project.
	 
	 	10.4	 	Regarding the documents and information provided by the Transferors to the Transferee and/or
Transferee’s agencies (including, without limitation, the lawyers, valuer, financial consultants,
etc.) prior to the Signing Date, Transferors hereby jointly undertakes that:






	 	10.4.1	 	all copies made from original documents are true and complete and that such original
documents are authentic and complete;
	 
	 	10.4.2	 	all documents supplied to the Transferee and/or Transferee’s agencies as originals are
authentic and complete;
	 
	 	10.4.3	 	all signatures appearing on documents supplied to the Transferee and/or Transferee’s
agencies as originals or copies of originals are genuine;
	 
	 	10.4.4	 	the Transferors have drawn to the attention of the Transferee and/or Transferee’s agencies
all matters that are material for the Transferee to proceed with the transaction as contemplated in
this Contract.




14









 











Article 11 General Representations and Warranties by Transferors 





	 	11.1	 	Party D is a legal entity duly established according to the laws of China which is validly and
legally in existence and also operating normally in accordance with the laws and regulations of
China.
	 
	 	11.2	 	Party B and Party C are PRC citizens with all civil abilities to enter into this Contract and
fulfil all of their obligations stipulated herein. Signing this Contract and fulfilling all of
their obligations stipulated herein by Party B and Party C shall not contravene or result in the
violation of or constitute a failure to fulfil or an inability to fulfil any of the stipulations in
any laws, regulations, stipulations, any authorization or approval from any government body or
department or the stipulations of any contract or agreement that Party B or Party C is a party to
or is bound by.
	 
	 	11.3	 	The execution of this Contract and fulfilment of all its obligations stipulated herein by
Party D shall not contravene or result in the violation of or constitute a failure to fulfil or an
inability to fulfil any of the stipulations in Party D’s Articles of Association or its internal
rules, any laws, regulations, stipulations, any authorization or approval from any government body
or department or the stipulations of any contract or agreement that Party D is a party to or is
bound by.





Article 12 Ownership 





	 	12.1	 	The Transferors are the legal owners of the Equity Stake (which is one hundred percent (100%)
of the equity stake of the Company) and have the full authority and right to transfer the Equity
Stake to the Transferee.




15









 












	 	12.2	 	The Transferors hereby undertake and warrant that as of the Settlement Date (inclusive), the
Equity Stake is not subject to any Claims or Encumbrances (including but not limited to any form of
option, acquisition right, mortgage, pledge, guarantee, lien or any other form of third party
rights and interest); and there is no agreement or undertaking in existence that may result in or
create any Claim or Encumbrance on the Equity Stake (including but not limited to the aforesaid
option, acquisition right, mortgage, pledge, guarantee, lien or any other form of third party
rights and interest).
	 
	 	12.3	 	No lawsuits, arbitrations, or other legal or administrative proceedings or governmental
investigations are on-going against any of the Transferors that will materially affect its ability
to sign this Contract or fulfil its obligations under this Contract.





Article 13 The Company and the Project 



The Transferors hereby severally and jointly represent and warrant to the Transferee that:





	 	13.1	 	The Company is a legal entity duly established according to the laws of China which is validly
and legally in existence and also operating normally in accordance with the laws and regulations of
China.
	 
	 	13.2	 	The Project has procured all the requisite approvals from relevant Chinese governmental
authorities and is in full compliance with the provisions of all relevant PRC laws and regulations.
	 
	 	13.3	 	There has been and is no investigation, prosecution, dispute, Claim or other proceedings in
respect of the Company or the Project, nor the Company or the Project has been punished or the
Transferors can




16









 






	 	 	 	foresee any punishment to be made by any administrative authorities of the PRC.






	 	13.4	 	The Company legally owns the Project and all requisite assets, machines, equipment, resources
and other items necessary for the operation of the Project.
	 
	 	13.5	 	The Transferors hereby jointly confirm and warrant to Transferee that, as of the Signing Date,
all debts and borrowings of the Company have been listed out in the Appendix II hereto and the
Transferors warrant that there shall be no new borrowings or debts incurred under the name of the
Company before the Settlement Date except for those listed out in the Appendix II hereto. The
Transferors shall assume joint liabilities for any undisclosed debts and/or borrowings of the
Company so as to hold Transferee and the Company harmless.
	 
	 	13.6	 	The Transferors hereby jointly confirm and warrant to the Transferee that, before the
Settlement Date, they shall normally operate and manage the Company and the Project and assure
there shall be no material adverse change on the operation, business and conditions of the Company
and the Project.
	 
	 	13.7	 	The Transferors hereby jointly confirm and warrant to the Transferee that, before the
Settlement Date, they shall procure the renewals of the Grid Connection and Dispatching Agreement
and the Power Sale Contract with Yunnan Dehong Power Co., Ltd. The Transferors hereby jointly
confirm and warrant to the Transferee that the power sale price provided in the aforesaid
agreements shall not be lower than RMB0.2/kwh in draught season and not be lower than RMB0.15/kwh
in wet season.




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	 	13.8	 	There has not been and is not any litigations, prosecutions, disputes or other proceedings
(whether current, pending or threatened) to which the Company is or may become a party.
	 
	 	13.9	 	There has not been and is not any litigations, prosecutions, disputes or other proceedings
(whether current, pending or threatened) with the involvement of the Project.
	 
	 	13.10	 	Prior to the signing of this Contract, the Transferors have entirely disclosed all
information regarding the debts assumed by the Company. As of the Settlement Date, such information
remains complete, authentic, accurate and true.





Chapter VI Disclosures, Representations and Warranties by Transferee



Article 14 Disclosures, Representations and Warranties by The Transferee 



The Transferee hereby represents and warrants to the Transferors that:





	 	14.1	 	The Transferee is a legal entity duly established according to the laws of Cayman Islands
which is validly and legally in existence and also operating normally in accordance with the laws
and regulations of Cayman Islands.
	 
	 	14.2	 	The execution of this Contract and fulfilment of all its obligations stipulated herein by the
Transferee shall not contravene or result in the violation of or constitute a failure to fulfil or
an inability to fulfil any of the stipulations of Transferee’s Articles of Association or its
internal rules, any laws, regulations, stipulations, or any authorizations or




18









 






	 	 	 	approvals from any government body or department or any contract or agreement that Transferee is a
party to or is bound by.






	 	14.3	 	No lawsuits, arbitrations, or other legal or administrative proceedings or governmental
investigations are on-going against Transferee that will materially affect its ability to sign this
Contract or fulfil its obligations under this Contract.





Chapter VII Employees




Article 15 Employees 





	 	15.1	 	All existing staff and workers of the Company shall upon the completion of the transfer of the
Equity Stake be employed by the Company. The terms and conditions of their employment including
their remuneration for their employment shall be determined by reference to the current standards
in principle and implemented in accordance with the stipulations of the labour laws and regulations
for foreign invested enterprises of China.
	 
	 	15.2	 	The Company shall protect the legal interests of the employees and use its best efforts to
maintain relative stability of the management.





Chapter VIII Confidentiality




Article 16 Confidentiality 




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	 	16.1	 	All Parties agree unless otherwise provided for in another relevant confidentiality agreement
that with regard to the confidential and exclusive information that have been disclosed to or may
be disclosed to the other Parties by any Party to this Contract pertaining to their respective
businesses, or financial situations and other confidential matters, All Parties to this Contract
which have received the aforesaid confidential information (including written information and
non-written information, hereinafter referred to as “Confidential Information”) shall:






	 	16.1.1	 	Keep the aforesaid Confidential Information confidential;
	 
	 	16.1.2	 	Save for the disclosure of the Confidential Information by a Party to this Contract to its
employees solely for the performance of their duties and responsibilities, neither Party to this
Contract shall disclose the Confidential Information to any Third Party or any entity.






	 	16.2	 	The provisions of the aforesaid Article 16.1 shall not apply to Confidential Information:






	 	16.2.1	 	which was available to the receiving Party from the written record before the disclosing
Party disclosed the information to the receiving Party and the written record can prove that the
confidential information was already known to the receiving Party;
	 
	 	16.2.2	 	which has become public information by means not attributable to any breach by the receiving
Party;




20









 












	 	16.2.3	 	which was obtained, by the receiving Party from a Third Party not subject to any
confidentiality obligation affecting the said Confidential Information.






	 	16.3	 	As far as any natural person or legal entity which is a Party to this Contract is concerned,
notwithstanding that it has ceased to be a Party to this Contract because of the transfer of its
rights and obligations pursuant to the terms of this Contract, the stipulations set out in this
Chapter VIII shall remain binding on it.





Chapter IX Breach of Contract




Article 17 Liability for Breach of a Representation or Warranty 





	 	17.1	 	If any representation or warranty made by any Party to this Contract is found to be an error,
or if any fact that has or is likely to have a major or substantial effect on the signing of this
Contract by any Party has been omitted, or if any representation or warranty is found to be
misleading or untrue in any respect, the non-breaching Party shall be entitled to look to the Party
(ies) in breach for full compensation for any loss, damage, cost or expense arising from the
erroneous, omitted, misleading or untrue representation or warranty of the Party (ies) in breach or
arising from any other breach of any representation and warranty given by the Party (ies) in
breach.
	 
	 	17.2	 	Each representation and warranty set out in this Contract is to be construed independently.




21









 












	 	17.3	 	For the avoidance of doubt, the Transferors hereby unconditionally and irrevocably agree and
confirm that they shall be jointly liable for any liability for any breach of representation or
warranty.





Article 18 Liability for Breach of Contract 





	 	18.1	 	In the event of a breach committed by any Party to this Contract, the said defaulting Party
shall be liable to the other Party (ies) for the losses and damages or any other liabilities
arising out of that defaulting Party’s breach of contract in accordance with the provisions of this
Contract and the laws and regulations of China. In the event that all Parties to this Contract
commit a breach, each of the Parties shall be liable to the other Parties for the losses and
damages or any other liabilities incurred respectively.
	 
	 	18.2	 	Notwithstanding the provisions of Article 18.1, no Party shall be liable to the other Party
(ies) for any indirect losses or consequential damages attributable to any breach under this
Contract.
	 
	 	18.3	 	For the avoidance of doubt, the Transferors hereby unconditionally and irrevocably agree and
confirm that they shall be jointly liable for any liability for any breach of this Contract
committed by any of Transferors.





Chapter X Force Majeure




Article 19 Force Majeure 





	 	19.1	 	“Force Majeure” refers to earthquake, typhoon, flood, fire, war, political unrest and such
special incidents or events that are deemed to be Force Majeure occurrences under the provisions of
the relevant laws and regulations of China. Provided always that the Parties agree that when a




22









 






	 	 	 	Party is short of funds, such event shall not be a Force Majeure event for the purposes of this
Contract.






	 	19.2	 	In the event of the occurrence of a Force Majeure event, the obligations of the Party to this
Contract affected by this Force Majeure event shall cease during the period of the Force Majeure
event and any term or period set out in this Contract and to which the affected party is subject
shall automatically be extended by a period equal to the term or period of the Force Majeure event,
the period of extension shall be the same as the period of cessation of the obligations by reason
of the Force Majeure event, and the said Party shall not be liable for any losses and damages or
any other liabilities arising out of a breach of contract as provided for in this Contract for the
duration of the Force Majeure.
	 
	 	19.3	 	The Party claiming the occurrence of a Force Majeure event shall promptly inform the other
Party (ies) in writing, and within seven (7) days thereafter, it shall provide sufficient evidence
(issued by the notary organization) of the occurrence and the continuity of the Force Majeure
event. It shall also do its best to eliminate the adverse effect of the Force Majeure event.





Chapter XI Resolution of Disputes




Article 20 Arbitration 





	 	20.1	 	Any dispute arising out of this Contract among the Parties to this Contract shall firstly be
resolved through friendly consultation. In the event that sixty (60) days after the commencement of
the friendly consultations, the dispute cannot be resolved through such means, either Party may
submit the dispute to the China International Economic and Trade Arbitration




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	 	 	 	Commission in Beijing for arbitration in accordance with its prevailing valid arbitration rules.






	 	20.2	 	The arbitration tribunal shall be composed by three (3) arbitrators and the arbitrators shall
be fluent both in English and Chinese Languages.





Article 21 Validity of the Arbitration Award 



The arbitration award shall be final and shall be binding on all Parties to this Contract. All
Parties to this Contract agree to be bound by the said award, and act accordingly.




Article 22 Continuation of Rights and Obligations 



After a dispute has arisen and during its arbitration process, other than the disputed matter, all
Parties to this Contract shall continue to exercise their other respective rights stipulated in
this Contract, and shall also continue to fulfil their other respective obligations stipulated in
this Contract.




Chapter XII Applicable Law




Article 23 Applicable Law 



The laws and regulations of the PRC shall govern and be binding on the establishment, validity,
interpretation and execution of this Contract. All disputes arising out of this Contract shall be
determined according to the laws of the PRC. In the event the laws of the PRC do not make provision
for a certain issue relating to this Contract, reference shall be made to general international
business practice.




24









 








Chapter XIII Miscellaneous




Article 24 Waiver 



The non-exerciseor delay in the exercise of an entitlement stipulated in this Contract by any Party
to this Contract shall not be regarded as a waiver of the said entitlement. Any single exercise or
partial exercise of an entitlement shall not rule out any future re-exercise of the said
entitlement.




Article 25 Transfer 



Unless otherwise described and prescribed in this Contract, neither Party to this Contract shall
transfer or assign all or any part of this Contract or transfer or assign that Party’s entitlement
or obligations as stipulated in this Contract provided that it has not obtained the consent in
writing from other Parties to this Contract in advance or the approval in writing from the
Examination and Approval Authority as required by the laws.




Article 26 Amendment 





	 	26.1	 	This Contract has been executed for the benefit of all Parties to this Contract and their
respective lawful successor(s) and assignees, and shall have legal binding effect on them.
	 
	 	26.2	 	This Contract may not be amended verbally. Only a written document signed by all Parties
indicating their consent to such amendment shall be effective, and where approval is required by
law, only with the written




25









 






	 	 	 	approval of the Examination and Approval Authority shall any amendment to this Contract become
effective.





Article 27 Severability 



The invalidity of any term in this Contract shall not affect the validity of the other terms in
this Contract.




Article 28 Language 



This Contract is written in both the Chinese Language and the English Language. In case of any
inconsistency, the Chinese language shall prevail.




Article 29 Validity of the Text and Appendix 





	 	29.1	 	The Chinese text of this Contract shall be signed in eight (8) sets of original and four (4)
sets of duplicate copies. Each Party shall each hold one (1) set of original and one (1) set of
duplicate, and one (1) set of original each shall be submitted to the Examination and Approval
Authority, the competent Administration for Industry and Commerce Administrative and any other
governmental authorities as required. The remaining originals shall be filed and kept by the
Company.
	 
	 	29.2	 	The English text of this Contract shall be signed in eight (8) sets of original and each Party
shall each hold one (1) set of original, and one
(1) set of original each shall be sent to the Examination and Approval Authority, the competent
Administration for Industry and Commerce Administrative and any other governmental authorities as
required. The remaining originals shall be filed and kept by the Company.




26









 













	 	29.3	 	The Appendices to this Contract shall constitute an integral part of this Contract, and shall
have the same effect as this Contract.





Article 30 Notification 





	 	30.1	 	Unless otherwise specified and prescribed, any Party issuing any notification or written
communication to the other Party (ies) according to the provisions of this Contract shall have them
written in the Chinese and English Language and shall send them as a letter by a courier service
company, or by facsimile. Letters sent by a courier service company, will require a confirmation to
be given seven (7) working days after handing over the notification or communication to the courier
service company. Any notification or written communication sent in accordance with the stipulations
of this Contract shall be deemed to be effective on the date of receipt. If they are sent by
facsimile, the date of receipt shall be deemed to be three (3) working days after transmission,
subject to a facsimile confirmation report evidencing this.
	 
	 	30.2	 	All notifications and communications shall be sent to the following addresses, until such time
when the other Party (ies) issues a written notice of any change to its address:





	 	 	 
	Party A’s Address:

	 	Room C2-1201, Sunshine Plaza, No.68, Anli Road, Chaoyang District, Beijing China
	Telephone Number:

	 	8610-6492-8483
	Facsimile Number:

	 	8610-6496-1540
	Addressee: 

	 	Mr. Lin You Su
	 
	 	 
	Party B’s Address:

	 	3-1-1701 Yue Hua Yuan, Chun Jiang Hua Yue, Hangzhou City, Zhejiang Province
	Telephone Number:

	 	0571-86696102






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	Facsimile Number:

	 	0571-86696807
	Addressee:

	 	Ye Jian Hua
	 
	 	 
	Party C’s Address:

	 	Microwave Bureau, Zhubao Road, LuxiCity, Dehong Prefecture, Yunnan Province
	Telephone Number:

	 	0692-2109932
	Facsimile Number:

	 	0692-2109931
	Addressee:

	 	Zhou Jian Bin
	 
	 	 
	Party D’s Address:

	 	Zhejiang Dahua Construction Group., Ltd. Zhaohui Road,
Hangzhou City, Zhejiang Province
	Telephone Number:

	 	0571-85461577
	Facsimile Number:

	 	0571-85461599
	Addressee:

	 	Chen Yan Fei






Article 31 The Entire Agreement 



This Contract constitutes the entire agreement of All Parties to this Contract pertaining to the
transaction agreed upon in this Contract, and shall replace all the previous discussions,
negotiations and agreements among All Parties to this Contract in respect of the transaction of
this Contract.




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IN WITNESS WHEREOF, the duly authorised representatives of the Transferors and the Transferee have
signed this Contract on the date first above written.



Party A: China Hydroelectric Corporation



Signature:                     



Name:



Position:



Party B: Ye Jian Hua



Signature:                     



Party C: Zhou Jian Bin



Signature:                     



Party D: Zhejiang Dahua Construction Group Co., Ltd.





     (stamp)


Signature:                     



Name:



Position:





29









 









Appendix I Form of Power of Attorney




Power of Attorney




     We,                                          (Company’s Full Name),
 a company duly established and existing in
accordance with the laws of the People’s Republic of China (the “PRC”)/ Cayman Islands, hereby
authorize Mr. / Ms.                     , with the PRC ID Card / US Passport No.                    , as our
authorized representative, to subscribe the Share Transfer and Capital Increase Contract with
                     (Company’s Full Name) in relation to the share transfer and capital increase of
Yunnan Huabang Electric Power Development Co., Ltd.



	 	 	 	 	 	 	 
	 	 	Signature of Legal Representative:
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	(Company’s Full Name)	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	(Stamp)	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	                    , 2007	 	 






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Appendix II Existing Debts and Borrowings of the Company




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Amount of	 	 	 	 
	 	 	 	 	Borrowing	 	Interest	 	 
	 	 	Creditor’s Name	 	(thousand RMB)	 	Payable	 	Note
	1

	 	Agricultural Bank of China, Yingjiang Branch
	 	 	108,000	 	 	 	 	Bank loan
	 
	 	 	 	 	 	 	 	 	 	 
	2

	 	Guizhou Dejiang Fumin Hydroelectric Co., Ltd.
	 	 	2,510	 	 	 	 	Equipment payable
	 
	 	 	 	 	 	 	 	 	 	 
	3

	 	Quzhou Naiji Electric Appliances Sales Co., Ltd.
	 	 	2,000	 	 	 	 	Equipment payable
	 
	 	 	 	 	 	 	 	 	 	 
	4

	 	Agricultural Bank of China, Yingjiang Branch
	 	 	1,320	 	 	 	 	Interest for January and February of 2007
	 
	 	 	 	 	 	 	 	 	 	 
	5

	 	Dahua Group
	 	 	4,390	 	 	 	 	non-drawn dividends which have already been declared
	 
	 	 	 	 	 	 	 	 	 	 
	6

	 	Dehong Prefecture Longjiang Hydroelectric Development Co., Ltd.
	 	 	6,400	 	 	 	 	Loan
	 
	 	 	 	 	 	 	 	 	 	 
	7

	 	Tianjin Power Generation Equipment General Plant
	 	 	40	 	 	 	 	Equipment payable
	 
	 	 	 	 	 	 	 	 	 	 
	8

	 	Yingjiang County Water Resources Bureau
	 	 	50	 	 	 	 	water resources fees payable
	 
	 	 	 	 	 	 	 	 	 	 
	9

	 	Dali Xidian
 Industrial Electric Machine Installation Co., Ltd.	 	 	20	 	 	 	 	 






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	 	 	 	 	Amount of	 	 	 	 
	 	 	 	 	Borrowing	 	Interest	 	 
	 	 	Creditor’s Name	 	(thousand RMB)	 	Payable	 	Note
	10

	 	Employee Allowances
	 	 	210	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	11

	 	Hangzhou Sanhe Electronic Control Equipment Co., Ltd.
	 	 	60	 	 	 	 	Equipment payable
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Total
	 	 	125,000	 	 	 	 	 







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